EXPORT PROMOTION:

Building Export Platforms to

Foster Growth and Inclusion

J. LUIS GUASCH

Conference on Growth,

Competitiveness and Role of

Government Policies

June 2010

A Story Line

Common Context: Export led growth strategy As a Firm wanting to export? : What do you do?

Identification of market? Product characteristics/standards? Identification of client? Evaluation of costs to exports? Permits, Certificates quality and/or phytosanitary? Packaging? Consolidation? Scale to small? Bill of landing? Cold chain? Trucking service? Exit point? Insurance? Custom agent? Certificate of origin? Trade finance?

Multimodal operator? As a policy maker should I assist? In what and how should I develop an export

program?

Rational

Should Governments Support Export Efforts?

What should be the Typology of Support?

Extent of Support?

Arguments for Support

Standard Market Failure Issues:

Coordination problems

Public good issues (information)

Externalities

Lumpiness/scale/critical mass

Inefficient drivers-transaction costs-

complementary policies

Counter: Government Failures? Implementation

issues

Educated Decisions, Experimentation,

Theory and Evidence on

Government support for Exports

Lederman et al (2009), Hogan et al (1992) on export promotion

agencies

) on export processing zones

Brenton and Newfarmer (2009), Ferranti et al (2004) , Maloney

et al (2010), on export diversification

Jayanthkumaran (2003), FIAS (2008), Aggarwal et al (2009

Roberts and Tybout (1997), Eaton et al (2007) on cost of entry

Rauch and Watson (2003), Brenton et al (2009), Lederman et al

(2009), on sustainability

Rodrik (2004, 2007) on justifying government interventions

Lederman et al (2009), Nassif (2009) on impact: US$1 expenses

induces US$20-40 rise on exports

Export Platform

Narrow vs Broad Platform

Narrow: Focus is on the last leg of the export

chain/business: assisting export minded

producers to export their existing products

Broad: Focus is on all the relevant elemnts of

the export chain

Export Platform

Objectives

Programs/Instruments

Institutions

Evaluation

A combination of passive and active policies

Building through a minimum platform shape to

country conditions and endownments

Objectives

Overall: Increase the level and content of

exports

In particular:

Increasing levels of exports of existing products (and

services)

Diversification: exporting new products and moving

up the value added chain of export products

Increasing number of exporters/ integrating SMEs

into export chain

ee

Productive Composition:

As a starting point, need to evaluate current productive composition

Decompose among the following, since strategy depends on the typology: Commodities

Indigenous products

Niche products

Mainstream manufacturing

Services

Evaluate export potential

Grow to value

Build on success

Differentiated approaches

Industrial organization of production

Large firms

SMEs (and even micro enterprises)

Consortia

Suppliers

Individual exporters

The critical bottlenecks for successful exporting are very different for large and medium firms than for the small ones

Components

Trade Policy and Access to Markets Tariff Regime Free Trade Treaties

Exportable/Production Supply Productive/export mapping Quality and Standards Human Capital Innovation and Knowledge Transfer Clusters and value chains Discovery and new products

Logistic and Trade Facilitation Costs Harware: Infrastructure and Export Zones Software: Associated Services and Trade Procedures

Social/Productive Inclusion: Knowledge Transfer Articulation CITEs Easy Export

Financial Instruments for Trade and FDI, Incentives Institutions: Export Facilitation, Quality Agency, Innovation Agency Overall Investment Climate

Access to Markets

Bilateral and multilateral FTAs

Market intelligence Identification of markets

Identification of product characteristics and standards

Identification of distributors/buyers

Identification of intermediaries/users: Diaspora

Run by technical Ministry (aided by private sector) and not by State or Foreign Relations Ministry

Communications and Internet

Export Promotion Agency

Exportable Offer

Quality: services and adoption

Productivity: knowledge and technology transfer

Innovation

Value Chain-Clusters

Information ICT

CITEs can play major role

Discovery

Productive/ Export mapping

Infrastructure and Services Logistic

Platform Hardware

Export (and Tourism) corridor Port and Accesses Regional exit points: ports and airports Logistic terminals-network Access Export zones Cross Border

Software Network of Service sites Single windows Dedicated lines: Perishables Privileged lanes: Track record Customs and Inspections Warehousing Cool Chain Multimodality Law Transport services: Trucking Certifications on quality and phytosanitary compliance Digitalization of Certificates of Origin

Global PRW Capacity in 2008

Source: IARW

Geographic Zones from Peru: Economic Potential,

Productive Efficiency, Access Costs, Poverty

Construyendo

la tipología:

Combinación

de potencial,

eficiencia,

pobreza y

accesibilidad

172. Priorizando Iversiones2. Priorizando Inversiones Rurales

Discovery

Quinoa

Sauco, aguaymanto, coca, asparagus, tropical

products, acquiferous, medicinal plants

Value added

Brand

Denomination of Origin

Specialized CITE

Financial instruments for Exporting

Export insurance

Pre and Post export financing

Credit to buyers abroad

Mainstreaming SMEs

Easy Export

Articulators

Quality, quality and quality

Knowledge

Packaging

CITEs

Internet access/ Centers

Articulators I

Articulators II: Adding value

Bottom up approach

In situ assistant

Role of communities/local governments

Easy Export

Export by post

From any part of the country

Avoids all intermediation and logistic costs

Filing one page trough internet

Limits in value to 5,000 US$

Limits in size 30 to 50 Kilos

But unlimited sends

Insurance available

Extraordinary impact on micro and SMEs

0

1,000

2,000

3,000

4,000

5,000

6,000

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2007 2008 2009

# E

xp

ort

acio

nes

Valo

r F

OB

Exp

ort

acio

nes

Valor FOB Exportado # Exportaciones

Performance Easy Export

RESULTS EASY EXPORT

(Númber of Firms that used the service

within 2.5 years of implementation

Fuente: Serpost

Elaboración: PROMPERU

2,000 new exporting firms

40% from provinces

60% from the greater capital area

20 new countries

Articulators

I: can be found, trained and hired

II: can be identified by I

CITES can also play that role

FDI also

Articulator I:

Usually specialized individual agents, can be

trained

Functions: identifying communities of small

producers and seeking coordination among

them; transfer information; identifying II

Articulator II: High value

Who are they? They are usually large, formal firms: The usual suspects plus others through digging

Larger exporters (often looking for scaling up), buyers, firms higher up in the value chain (pulp, canning etc), foreign firms, chains, firms in related business

Functions: transfer know-how, quality issues, lock in contracts ex-ante (that can be used for securing finance)

Quality, reliability and scale are the critical factors for II to get involved (prices obviously help)

Range of products

All sort of fruits, vegetables and horticulture

Animal related, meat, cheeses, lactic, fiber

Fish farming, trout, tilapia, shrimp and other

indigenous species

Peanuts and other nuts, berries, medicinal

plants, potatoes, wood and related products,

Grains

Art crafts, leather and related products

Results: An example of

mainstreaming micro and SMEs into

exports

Within 24 months, in the Peru program 67,000 small producers (mostly agriculture ) were articulated, increasing sales by US$ 65 million, exporting over 50% of their products (tripling their earnings), and about 150,000 new jobs were created

Profile: Small and micro: farmers (about 1 hectare holdings), animal husbandry (meat, cheeses, fibers), art crafts , fish, wood, tourism, miners

Program complemented by selective infrastructure projects to reduce cost (and time) to access to markets

Through about 200 mermaids/articulators

347.9 347.9

121.8

0

50

100

150

200

250

300

350

400

450

500

Annual Earnings

per capita without

roads

Annual Earnings

per capita with

roads

Increase in earnings of households benefiting from better access to

markets through rural roads

(in $US annual)

Source: ENDES-INEI

CITEs

Centers of technology and knowledge transfer, mostly oriented to serve SMEs

In situ

Offer services, knowledge and technology transfer, conformity to standards, testing, assist in articulation and export

And training

Highly focused: leather and shoes, furniture and wood, art craft, metal-mechanic, textile, fruits, packaging, agro industry, software, logistic, new products

Privately run

Capital equipment grant, operating costs through user fees

Spain (pioneer), Peru, Dominican Republic, Croatia, Slovenia, Honduras, Colombia, Mexico, etc

EXPORTA FACIL

Númber of Exports

0

100

200

300

400

500

600

ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC

2007

2008

2009

Value FOB Exported

0

50000

100000

150000

200000

250000

ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC

2007

2008

2009

Products Exported

Contenido del Envío Participación

Participación

Acumulada

Bisuteria 30.21% 30.21%

Productos Naturales 16.66% 16.66%

Ropa 14.90% 14.90%

Joyeria 10.29% 10.29%

Insectos Disecados 3.04% 3.04%

Instrumentos Musicales 2.32% 2.32%

Ceramicos 1.93% 1.93%

Pisco 1.20% 1.20%

Textiles (Alfombras, arpillería, otros) 1.16% 1.16%

Libros 1.16% 1.16%

Jugueteria 1.10% 1.10%

Tallas en Piedra 0.94% 0.94%

Postales 0.73% 0.73%

Calzado 0.51% 0.51%

Cabello 0.41% 0.41%

Artesania 0.32% 0.32%

Litografías 0.29% 0.29%

Carteras 0.28% 0.28%

Medicina 0.19% 0.19%

Otros 12.37% 12.37%

Total 100.00% 100.00%

Products Exported to…PAISES COD

N°

ENVIOS% PARTIC

NUEVA ZELANDIA NZ 5 0.4%

PANAMA PA 9 0.6%

SINGAPORE SG 5 0.4%

GUATEMALA GT 1 0.1%

ISRAEL IL 5 0.4%

CHINA CN 4 0.3%

CYPRUS CY 1 0.1%

MALAYSIA MY 2 0.1%

NICARAGUA NI 2 0.1%

SOUTH AFRICA ZA 9 0.6%

TURKEY TR 2 0.1%

LUXEMBOURG LU 1 0.1%

VIRGIN ISLANDS OF THE U.S.A VI 2 0.1%

BOLIVIA BO 3 0.2%

MALTA MT 1 0.1%

NORUEGA NO 8 0.6%

UKRAINE UA 2 0.1%

COSTA DE MARFIL CI 1 0.1%

EMIRATOS ARABES UNIDOS AE 1 0.1%

HONG KONG HK 1 0.1%

HUNGARY (REP) HU 1 0.1%

RUMANIA RO 3 0.2%

SAUDI ARABIA SA 1 0.1%

ECUADOR EC 3 0.2%

FINLANDIA FI 1 0.1%

PARAGUAY PY 1 0.1%

TAILANDIA TH 1 0.1%

TRINIDAD Y TOBAGO TT 1 0.1%

LITHUANIA 4 0.3%

GUYANA FRANCESA 1 0.1%

KAZAKHSTAN 1 0.1%

MOROCCO 1 0.1%

LEBANON 1 0.1%

QATAR 1 0.1%

TOTALES 1389 99.6%

PAISES CODN°

ENVIOS% PARTIC

ESTADOS UNIDOS US 485 34.9%

AUSTRALIA AU 174 12.5%

GRAN BRETAÑA GB 103 7.4%

FRANCIA FR 66 4.8%

ESPAÑA ES 61 4.4%

CANADA CA 58 4.2%

NETHERLANDS NL 29 2.1%

JAPON JP 33 2.4%

ALEMANIA DE 30 2.2%

ITALIA IT 24 1.7%

CHILE CL 24 1.7%

DINAMARCA DK 1 0.1%

MEXICO MX 20 1.4%

POLAND (REP) PL 14 1.0%

BELGICA BE 8 0.6%

BRAZIL BR 13 0.9%

SUECIA SE 10 0.7%

SUIZA CH 27 1.9%

REP. CHEQUE CZ 10 0.7%

ARGENTINA AR 22 1.6%

URUGUAY UY 1 0.1%

COLOMBIA CO 17 1.2%

AUSTRIA AT 13 0.9%

REPUBLICA DOMINICANA DO 2 0.1%

RUSSIAN FEDERATION RU 10 0.7%

TAIWAN TW 8 0.6%

GRECIA GR 2 0.1%

KOREA (REP) KR 3 0.2%

PORTUGAL PT 4 0.3%

PUERTO RICO PR 13 0.9%

IRLANDA IE 6 0.4%

VENEZUELA VE 5 0.4%

COSTA RICA CR 7 0.5%

Exports Going to…

ESTADOS UNIDOS, 34.9%

AUSTRALIA, 12.5%

GRAN BRETAÑA, 7.4%

FRANCIA, 4.8%

ESPAÑA, 4.4%

CANADA, 4.2%

NETHERLANDS, 2.1%

JAPON, 2.4% ALEMANIA, 2.2%

ITALIA, 1.7%

Typical Assistance to Farmers

Soil preparation, seed selection and treatment,

harmonization and planting density, timing of

production, use of fertilizers, fito-sanitary

control and testing

When applicable, procedures for organic

certification and the certification itself

When applicable FSC certification for forestry

producers

Institutionality

Led by a strong Export Promotion Agency

With a Board composed by private sector agents

Capacity and appropriate resources

Coordination capacity

Reduction in cost comes from

improvement in level of service

10%

5%

2.50%

1%

median

0 20 40 60

days

pro

bab

ility

(lo

g s

cale

)

expected before project

Gains for the shipper on the Northern Corridor (Kenya):

Transportation costs= 130x2.2 (days saved in motion)=$286 (7% of freight

costs).

Value of time= 0.1%XcontainervaluexT()=0.1%x50000X25=$1250

commodity specific